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2019.10.01 11:57

Lithuanian banks hit back against proposed tax on their assets

LRT.lt2019.10.01 11:57

After Lithuanian MPs have proposed a tax on bank assets to raise funds for social welfare, the country's banks have hit back, saying the levy would make loans for businesses and households more expensive and dampen economic growth.

Members of the Electoral Action of Poles in Lithuania–Christian Families Alliance (LLRA-KŠS) party have drafted a bill for a 0.4-percent annual tax on commercial bank assets. It would help raise 100 million euros to be spent on fighting poverty and income inequality.

In a press event on Tuesday, the Association of Lithuanian Banks (LBA) said that the tax would result in slower economic growth, representing a loss of between 150 and 450 million euros.

“We do not want to scare the society, only to present calculations of the possible effects of more or less irresponsible tax proposals,” said LBA president Mantas Zalatorius.

According to him, the tax would make banks raise interest rates on mortgages from 2.4 percent to between 2.8 and 4.6 percent. Business loans interest would rise to 3.8 percent, from the current level of about 3 percent.

Data by Statistics Lithuania show that almost 23 percent of people in the country lived in relative poverty in 2018. One in three people aged over 65 faced poverty.

Lithuanian Prime Minister Saulius Skvernelis has said his government would support the tax.

President Gitanas Nausėda, on his part, recently proposed a plan to raise annual welfare spending by 100 million euros, to be funded by delaying tax cuts and cutting certain diesel fuel tax exemptions.